The prevalence of Zombie Banks: The case of the EU during 2008-2014.

Details

Supervisors

Peirce, Robert

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

Zombie banks have been discussed extensively since the 1990s. While academic research has shed light into their malicious effect in the economy of the countries to which they belong, there has been little agreement on how to identify zombie banks. First, this paper analyses how prevalent zombie banks are during our sample period of 2008-2014 in the EU. Second, it checks the consistency of the prevalent identification methods of zombie banks used in academic research. The findings suggest that zombie banks are prevalent no matter the identification method used, but the identification methods are widely inconsistent. Third, this paper presents a new way of identifying zombie banks in times of financial crisis characterised by large-scale government interventions in banks. The findings point out that government support did not only go to solvent banks as it was supposed to, but also to insolvent banks that become zombie banks after this support.